New Delhi [India], January 29 : Indian stock market is set for a reversal in performance in the coming days says a recent report by Morgan Stanley. The report highlighted several factors that indicate a potential recovery after a period of slowdown and uncertainty.
It said "A growth slowdown has unnerved the market. We believe growth is returning soon".
One of the key points raised in the report is the recent growth slowdown, which has unsettled investors. However, Morgan Stanley believed that growth is likely to return soon.
The decline in stock prices has been accompanied by falling trading volumes, which suggests that the market downturn is more due to a lack of buying interest rather than aggressive selling. This indicated that the market may not be as weak as it appears.
The report said "The price fall has been on falling trading volumes implying an absence of a bid rather than a forceful selling. Private financials appear to be offer the best risk-reward ratio".
The report also pointed out that private financial companies currently offer the best risk-reward ratio, making them an attractive option for investors. Additionally, Morgan Stanley's proprietary sentiment indicator has entered the "buy territory" for the first time since mid-2022.
While the indicator could still drop further, as it did during the market crash in March 2020, the firm believes that the fundamentals do not support a significant deterioration in market sentiment from current levels.
On the macroeconomic front, the report noted that government spending is accelerating, which is expected to support economic growth. The fiscal consolidation planned for the financial year 2026 is likely to be much smaller than in 2025, reducing pressure on the economy.
Furthermore, the Reserve Bank of India (RBI) is committed to providing more liquidity and easing regulatory burdens, which should help stimulate growth. These factors suggest that the worst of the slow growth phase may be behind us.
The report also added that the retail investors have also shown resilience during this period, which sets the stage for a potential recovery in the broader market. Their continued participation could play a crucial role in driving the market's upward movement.
However, the report also cautions about potential risks, such as policy failures, a deeper correction in the US markets, and a slowdown in global growth. These factors could pose challenges to the anticipated recovery.
In conclusion, report painted an optimistic picture for the Indian stock market, suggesting that the conditions are favorable for a turnaround in the near future.
Investors, however, should remain cautious and keep an eye on global and domestic developments that could impact the market.
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